| Abstract: | In social sciences exists a broad consensus about the impact of political institutions on economic development. There is dissent, however, about the influence of democratic order on economic performance. Based on arguments from economic institutionalism, this paper argues that democracy has a significant and positive impact on productivity growth. In contrast to autocratic order, democratic systems can be interpreted as a competition-friendly regulation of a natural monopoly, which results in comparatively high productivity gains. This hypothesis is tested for a sample of 81 countries for the 1975–2000 period. Different regression models provide empirical support for the assumption that increasing levels of democracy produce a productivity dividend. |
